A United States appeals court has overturned a ruling that dismissed a class-action lawsuit led by investors against cryptocurrency exchange Binance. The investors claimed they were deceived into thinking they were buying cryptocurrency tokens registered as securities.
According to a filing on March 8 with the United States Court of Appeals for the Second Circuit, the district court's ruling, which dismissed investors' allegations of transparency issues in Binance's sale of securities, has been overturned in favor of the investors.
“We hold that each of the district court’s bases for dismissing Plaintiffs’ claims that are before us on appeal was erroneous,” the filing stated.
Chase Williams filed the lawsuit in April 2020 on behalf of investors in a similar situation to him, arguing that Binance allegedly contracted to sell securities without being registered as a securities exchange or broker-dealer.
Furthermore, the investors have bseeking to cancel the contracts they entered into with Binance.
“Plaintiffs seek damages arising from Binance’s alleged violation of Section 12(a)(1) of the Securities Act of 1933 (Securities Act), 15 U.S.C. § 77l(a)(1), which they claim occurred when Binance unlawfully promoted, offered, and sold billions of dollars’ worth of crypto-assets called “tokens,” which were not registered as securities.”
The district court dismissed the lawsuit, citing the investors' claims as being untimely according to the relevant statutes of limitations.
However, the appeals court agrees with the plaintiffs claims that Binance is subject to domestic securities laws and their initial filing was timely.
This comes as Binance continues to grapple with ongoing legal challenges from the U.S. securities regulator.
Related: Binance.US says it’s ‘radioactive’ to banks, SEC dealt ‘near-mortal blow’
On March 6, Cointelegraph reported that the U.S. Securities and Exchange Commission (SEC) has been “unable or unwilling” to answer requests for information concerning the custody of customer assets.
The SEC sued Binance, Binance.US, and its founder and former CEO Changpeng “CZ” Zhao in June 2023, alleging they had sold unregistered securities and mixed customer assets in a separate firm Zhao controlled.
In November 2023, Binance reached a $4.3 billion settlement with the U.S. Department of Justice, admitting to violating U.S. money laundering and terrorism financing laws.
As part of the settlement, Zhao pleaded guilty to money laundering charges and faces his criminal sentencing hearing in April
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